Billionaire Wu Yajun Steps Down As Longfor Chair Amid Sector Crisis

Wu Yajun, the billionaire cofounder of real estate developer Longfor Properties, has stepped down as chair of the company amid an industry-wide crisis that is showing little sign of abating.

Shares of the Hong Kong-listed Longfor tumbled as much as 38% on Monday after the 58-year-old tycoon announced her decision late Friday night. Due to age and health reasons, Wu has resigned as executive director and chairperson of the board, but will continue to advise the company on its strategic development, Longfor wrote in a filing to the Hong Kong Stock Exchange.

She has handed the reins over to 40-year-old Chen Xuping, who has been with the company since 2008 and first worked as a construction manager before being promoted through the ranks. But the mogul, whose wealth plunged $1 billion to $6.1 billion in a single day, isn’t giving investors much to cheer.

“Longfor is experiencing management changes when the industry is undergoing a lot of difficulties,” says Kenny Ng, a Hong Kong-based securities strategist at Everbright Securities. “Investors are worried about how it would cope with the challenges.”

The company, for its part, said in a separate Friday filing that the role changes were results of its corporate governance strategy and focuses on nurturing senior managers through “culture and mechanism.” It disclosed in the same filing that contracted sales stood at 59.8 billion yuan ($8.2 billion) in the third quarter of this year, representing a mere 0.8% growth from the same period a year ago.

China’s real estate industry, meanwhile, is still mired in a deep crisis. Home prices have sank for a 13^th straight month in September, as Beijing’s campaign to reduce financial leverage causes a wave of defaults, and buyer confidence remains weak in a slumping economy.

Longfor is considered to be on stronger footing than its debt-laden peers such as the now defaulted China Evergrande Group, thanks to Wu’s emphasis on financial discipline and relative prudence when it comes to borrowing. The company said in the aforementioned filing that it had no debt due this year, and its financial position “remains healthy and stable.” It was allowed in August to sell $219 million worth of yuan-denominated bonds that are guaranteed by the state, as Beijing sought to boost market sentiment towards healthier developers.

Still, the company’s shares have lost 70% of value year to date, underscoring investors’ pessimism toward the real estate sector. To prevent the current crisis from spiraling out of control, officials have also announced a series of easing policies including tax exemptions and lowering mortgage rates. But Fitch Ratings said in an October 24 report that the moves are “selective and modest in scale,” and unlikely to boost housing demand.